Over the past five years, as outsourcing in the commercial sector has grown steadily but modestly, the annual contract value of outsourcing deals in the public sector has more than doubled, according to analysis by outsourcing consultancy ISG. Today, public sector outsourcing deals account for two-thirds of the annual contract value in the market overall. Much of the activity is happening in the U.S., which consists almost entirely of information technology work and driven in large part by Department of Defense spending.

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The federal government is pursuing outsourcing in a number of areas where agencies had traditionally created in-house technology functions in the past.

Shared services offers the possibility of substantial budget savings. This dynamic drew private sector companies toward outsourcing and government managers, faced with growing pressure to increase efficiency, are being encouraged — even forced — to look at shared services as a smart way to approach this.

The move to shared services hasn't been easy, as it runs counter to a long history of each agency establishing its own IT functions.

Many agencies' budgets remain flat, they are understaffed, and face a skills gap to pursue cloud, mobile and big data technologies.